The clampdown on the re-issue of options to purchase (OTP) by developers, as well as the lack of new launches could be reasons for the decline in new home sales, observed analysts.
After rising for five consecutive months, new private home sales in Singapore fell more than 50% in October amid a lack of new launches and a clampdown on the re-issue of options to purchase (OTP) by developers.
New home sales, excluding executive condominiums (ECs), plunged 51.7% to 642 units in October from 1,329 units in September, showed Urban Redevelopment Authority (URA) data. Including ECs, sales volume dropped 50.8% month-on-month to 682 units.
On an annual basis, new private home sales (excluding ECs) fell 31.1% from the 932 sold over the same period last year.
The bulk of last month’s purchases were in the Rest of Central Region (RCR) at 44.1% and Outside of Central Region (OCR) at 45.5%. The Core Central Region (CCR) accounted for 10.4% of the units sold.
Christine Sun, Head of Research and Consultancy at OrangeTee & Tie, observed that the new curbs on the re-issue of OTP “seemed to have taken a toll on the market as sales figures slipped more than 50% last month”.
In September, the URA rolled out new regulations restricting developers from re-issuing OTP to the same purchaser of the same unit within 12 months following the expiry of the earlier OTP.
Recommended article: What Is An Option to Purchase And Are Sellers Allowed To Keep Re-Issuing OTPs?
Aside from instilling greater financial discipline, URA’s new regulation was made to ensure buyers “commit to a property purchase only when they are ready to exercise the OTP within the validity period”.
“The clampdown on the reissuing of OTP subsequently caused a knee-jerk reaction which resulted in a temporary fall in sales volume last month. As the property market is highly sentiment driven, the pull-back in housing demand is unsurprising,” said Sun.
Nonetheless, she expects sales to pick up again after the ‘dust settles’.
Analysts also pointed to the lack of new launches as another reason for the decline in new home sales.
Developers launched 423 units in October, with only one new launch, namely the 319-unit Hyll on Holland.
Sun said the number of homes launched last month was lower than those launched during the circuit breaker period at 640 units in April and 615 units in May.
Huttons Asia Research Director Lee Sze Teck added that the figure was the lowest for this year and the lowest since December 2019.
“It was like a game of blink in October with buyers staying on the sideline waiting to see if developers will adjust their prices. This group of buyers belong to those who do not need an extension of the option to purchase but nevertheless held back their purchase to observe,” said Lee.
With Singapore at the cusp of the third phase of reopening, Sun expects market sentiment to improve as the hike in economic activities may help revive various business sectors next year.
“The gradual restoration of aviation connectivity may see more foreign buyers returning to Singapore’s property market in the coming months.”
Lee, on the other hand, expects the promotions unveiled by developers to stimulate interest and translate into sales.
“There were 11.11 promotions rolled out by developers in November in conjunction with the largest shopping event, Singles’ Day. Promotions of more than $500,000 were dangled for select units for limited time,” he said.
“The sales were across all unit types and further proved that there are many buyers in the market who do not require re-issue of options.”
And with four more launches expected for the rest of 2020, Lee, much like Sun, expects sales for this year to stand at between 9,000 and 9,500 units.
“Although the estimates are lower than 9,912 units sold in 2019, it is still comforting that more than 9,000 new homes could be sold this year, considering that the pandemic is probably one of the worst crisis to hit Singapore’s property market,” said Sun.